Yield Curve Inversion

Selected range · January 1962 — June 2026

1962Drag the handles to resize · drag the selection to move it2026

About this chart

The Yield Curve Inversion chart compares the yield on 10-year U.S. Treasury securities with the yield on 1-year U.S. Treasury securities.

Under normal conditions, longer-term Treasury securities usually offer higher yields than shorter-term securities. Investors generally expect additional compensation for lending money over a longer period and accepting greater uncertainty about future inflation and interest rates.

The chart measures the difference between the 10-year Treasury yield and the 1-year Treasury yield.

A positive value means that the 10-year yield is higher than the 1-year yield. This is generally described as a positively sloped or normal yield curve.

A value of 0 means that the two yields are equal.

A negative value means that the 1-year yield is higher than the 10-year yield. This condition is known as a yield curve inversion.

An inversion can occur when short-term interest rates are high relative to longer-term rates. This may reflect restrictive monetary policy, expectations that inflation and economic growth will slow, or expectations that the Federal Reserve may reduce interest rates in the future.

Historically, yield curve inversions have often occurred before U.S. recessions. The economic slowdown, however, does not usually begin immediately when the curve first becomes inverted. The time between an inversion and a recession has varied considerably.

The depth of an inversion shows how far the 1-year yield is above the 10-year yield. A more negative reading represents a deeper inversion, while a movement back above zero means that the curve is no longer inverted.

A return to a positive spread should not automatically be interpreted as an improvement in economic conditions. In some historical episodes, the curve became positive again because short-term yields declined as the economy was already weakening.

The chart should therefore be treated as a measure of the shape of the Treasury yield curve and a source of historical recession context, not as a precise forecast of when a recession will begin.

Limitations

  • The yield spread is a market-based indicator, not a direct measure of current economic activity or a guarantee that a recession will occur.
  • An inversion can precede a recession by many months, and the delay varies substantially across historical episodes.
  • The model uses the 10-year and 1-year Treasury yields, while other commonly cited yield-curve measures use different maturities and may produce different signals.
  • The spread can be influenced by monetary policy, inflation expectations, term premiums, central-bank asset purchases, and global demand for Treasury securities.
  • A return to a positive spread after an inversion does not necessarily mean that recession risk has disappeared; historically, economic weakness may emerge after the curve begins to steepen.
  • The relationship may change across monetary regimes, and the limited number of recession cycles makes precise probability estimates uncertain.
  • The indicator should be interpreted together with broader economic data and should not be treated as a precise recession-timing or market-timing signal.

Methodology

The yield-curve spread is calculated by subtracting the 1-year U.S. Treasury yield from the 10-year U.S. Treasury yield.

Yield-curve spread
10-year Treasury yield − 1-year Treasury yield
Positive spread
10-year Treasury yield is higher than the 1-year Treasury yield
Inverted spread
1-year Treasury yield is higher than the 10-year Treasury yield

The zero line separates a normal yield curve from an inverted yield curve. The chart also includes fixed percentage-point reference levels above and below zero to show the size of the positive spread or inversion. The model uses monthly observations of the 10-year minus 1-year Treasury spread beginning in January 1962.

Data sources

  • Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity

    Range: January 1962 to the latest available observation

    Source: Board of Governors of the Federal Reserve System (US), Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity, Quoted on an Investment Basis [DGS10], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/DGS10

  • Market Yield on U.S. Treasury Securities at 1-Year Constant Maturity

    Range: January 1962 to the latest available observation

    Source: Board of Governors of the Federal Reserve System (US), Market Yield on U.S. Treasury Securities at 1-Year Constant Maturity, Quoted on an Investment Basis [DGS1], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/DGS1

For educational use only. This chart shows historical market relationships and valuation context. It is not investment advice, a trading signal, or a recommendation to buy, sell, or hold any financial instrument. Historical patterns do not guarantee future results.